National Grid sets sail with Cape Wind deal

National Grid and Cape Wind sign power purchase contract for first US offshore wind farm

Just days after finally securing planning permission for the first offshore wind farm in the US, developer Cape Wind revealed that it has pulled in its first customer in the form of grid operator National Grid.

In what has been described as a "landmark move", National Grid and Cape Wind will today file a contract with the Massachusetts Department of Public Utilities that will see the UK-based grid operator buy half the wind farm's output for 20.7 cents per kilowatt hour, including electricity, renewable energy certificates and other potential market attributes.

The two-part contract allows the purchase of the remaining 50 per cent by another party or parties.

Running for 15 years, the contract provides a major boost to the controversial $1bn (£666m) Cape Wind project, which secured planning approval last month after a nine-year fight. It will also bolster National Grid's position in a US market that it has earmarked for rapid expansion.

The 20.7 cent price is expected to rise by 3.5 per cent a year over the course of the contract, and according to estimates the deal will mean that a typical customer using 500kWh per month of electricity will see monthly bills increase by $1.59, translating to an increase in bills of about two per cent a month.

However, National Grid defended the price hike, arguing that the deal was crucial to expanding its portfolio of low-carbon energy. "We recognise that all renewable energy… has a cost associated with it, [but] carbon-based generation comes with its own set of long-term costs – to our health and our environment," said National Grid president Tom King.